Agricultural Economics Department


Date of this Version



Research Bulletin 243, University of Nebraska College of Agriculrure


(c) 1971 University of Nebraska


The purpose of this study was to determine whether shipments of wheat by railroad from Nebraska and other Great Plains States are discriminated against relative to shipments from other wheat producing states and regions. Primary objectives were: 1. To develop a technique for measuring place discrimination. 2. To employ the technique in testing empirical data for evidence of discrimination. 3. To analyze the results and explore implications for geographically- separated wheat shippers. Ratios of railroad revenue/out-of-pocket costs for the years 1958 and 1966 were used to compare the relative cost burden borne by wheat shipments in geographically-separated hauls. Resulting ratios range in value from less than 1 to more than 5, suggesting widespread economic place discrimination. The Midwest tends to be discriminated against relative to most other wheat producing areas. Revenue/out-of-pocket cost ratios for wheat shipments within the Western Trunk Line Territory (roughly the Midwest) are among the highest encountered. Moreover, more than one-half of U.S. carload movements of wheat originate in this territory. Discrimination against traffic moving from Western Trunk Line to other territories is of somewhat lesser magnitude, but traffic moving out of this territory is light. Much of the discrimination appears to be related to intermodal competition or the lack thereof. Longer hauls, for example, tend to be discriminated against relative to shorter hauls; this may be in response to more intensive truck competition for the shorter movements. While Western Trunk Line shippers are generally discriminated against relative to other wheat shippers, movements from this territory toward the Gulf Coast fare rather well. This may be a result of barge competition for Gulf Port shipments. Shipments to the West Coast also receive more favorable treatment. Intermodal competition is less likely to be the causal factor here, however. The railroads may fear a loss of traffic due to an elastic foreign demand for export wheat moving through West Coast ports. Covered hopper car shipments are generally discriminated against compared to boxcar traffic moving under similar circumstances. Since per-unit freight rates are the same for both car types and since per-unit costs are lower for covered hopper car movements, economic discrimination against shipments moving by hopper car is inevitable. Rates, in other words, have not been adjusted in response to lower costs for covered hopper car shipments. Northern Great Plains States are discriminated against relative to other wheat producing states. The discrimination increases as one moves from south to north through the tier of Great Plains States. North Dakota and Montana have the highest revenue/cost ratios of all wheat producing states examined in this study. South Dakota and Nebraska have the next highest ratios. The remaining Great Plains States (Kansas, Oklahoma and Texas) are discriminated against but in much lesser degree. The reason is not clear. Greater distance of the more northerly states to major markets (less truck competition) may be a factor. Improved accessibility of southern states to barge routes may be another. Intrastate wheat shipments are in general more disadvantaged than interstate movements. The reason is unclear; it may be due to lack of ICC jurisdiction over intrastate traffic. Western Nebraska shippers tend to be discriminated against relative to those in eastern Nebraska for wheat hauled to major terminal markets at Omaha and Kansas City. A positive linear relationship is found between degree of discrimination and distance to these major markets. Shippers located closer to terminals probably receive the benefit of more truck competition. Several changes occurred between 1958 and 1966. Ratios for both ,territorial and state-to-state shipments in boxcars generally declined during the period 1958-1966. It may be that costs increased at a more rapid pace than did freight rates. There was also more variability in revenue/cost ratios in 1958, an indication that there was more discrimination in that year. Covered hopper cars were only beginning to go into service in 1958 and so no comparisons with 1966 hopper-car results were possible. While the overall level of discrimination was a bit lower in 1966 than in 1958, the same general pattern emerged. Discrimination against Nebraska shipments became somewhat more intense in 1966 than in the earlier year. Generally speaking, though, the same states and regions were discriminated against in each year. Thus, place discrimination tends to be persistent; it appears to be a long-term phenomenon. The potential for long-run misallocation of resources is therefore present.